About the author:  Founder of Skeptic Magazine (skeptic.com), which studies against para- and pseudo-science, and just nonsense in general.
While our brain likes to form relationships "A cause B", nothing is done for false-positive filitering.  Wrote a number of books, such as "Why people believe weird things", ... His books are spin off of the magazine projects, and the Mind of the Market is the 4th in the trilogy.  http://en.wikipedia.org/wiki/Michael_Shermer is a great summary of his work.

Notes on the talk Mind of the Market
 
Chap 1: Matthew Effect
Parable of the talent
The richer gets richer
Ex. Market place of science: most eminent scientists get most credit, while the junior collaborators have little

Innovative ideas and quotes: Yogi Barra: half the things I said were not by me.

Marketers knows Matthew efffect = cumulative effect = best seller effect
e.g. Ratings on Amazon, iTunes, download rate of songs grows

Thus, market has a mind of its own, as a result of the Matthew efffect
 
Chap 2.
SKU marketing unit: 10M products in Manhattan, compare to 300 on an island thousands of years
Look at the exponential growth of people's productivity per year: timeline ratio of modern 250 years = 3.6 mins in a 24-hr day.
 
Consider economy as a complex adaptive system, bottom up without design: started with Ed Wilson in 70's, but killled by Gould
Trick to gain acceptance: tell Conservatives the idea of free market, tell Liberals the idea of evolutionary system
 
Result: emergent properties of a complex system
ex. Mitochondria used to be independent cells, hence different DNA
ex2. immune system, consciousness (will be explained a emergent property), language, (e..g word "like" for Californians)

No top-down design.
Like Adam Smith, natural selection, nobody selecting anything
Just using the metaphor of design, but not by a designer. similar in economies.

Chap 3. Folk economics
On the plains of Africa, we are used to speed and age, size from ant to mountains.
Psychological time: our natural ways does not recognize the 2000s year global warming.

no markets, hunter gathering communities, accumulators' gains are ill-gotten,
like science, it takes a long time to grasp and figure out these non-intuitions

Adam Smith: prof of Moral Philosophy. Anything but pro-business and pro-wealth.
His Theory of Moral Sentiment: people have natural propensity for selfishness, but also moral such as emphathy, etc.
Thus free market assumes these collaborative sentiments

Problem for evolution: Why should people be altuistic?
Expand the circle of reciprocal altuism, within a group of trusted circle.
Gossip is for tracking the trust levels of people, those who are cooperating and those who free-load
Religion is a way of enforcing group membership
Why do we tip?
possibly, signal to friends, ethical egoism, selfishnesss of knowing that you are unselfish
But why should you feel good and bad about anything?
Since emotions cost energy, so they must be there for a reason
Hunger is a emotion to signal something.
Emotion is a way to bring the system back to balance
Romantic attraction: in the long run keeps propagate genes for species to continue
Evolutionary psychology have the whole thing down, to know everything that we like:
Women like men with V shape, Men like women with hour-glass shape, 0.67 ratio, ...

Mark Hausser of Harvard:
Experiment: Imagine a trolley cart will kill either 5 people, or if you switch the gate, to kill 1 on the next track.
Will you switch?  Most say yes.
Experiment 2: Will you kill a fat man to stop the killing. Most people say no.

Evolutionary Psychology explains these moral intuitions:
visceral difference between a switch and a person

Game theory: cognitive psychology and evolution psychology
Prisoner dilemma
Ultimatum game: split the 100 dollars. 1 shot to offer the next. If he rejects, no one keeps anything. If accepts, then both keep it.
Hypothesis of human beings: we are ratioal, free, and utility maximizing.
All 3 points are debunked by psychological experiments
Why do 90-10 split rejected? It isn't fair. You are willing to pay $10 to punish her transactions.
e.g. Economic transactions, divorces, as punishments.
We evolve in a zero- sum game.

Even with monkeys having tiny brains, not calculating at all.
All human relationships as a game of exchanging something.
Economy as doing the same thing.

Neuro-Economics
Real time scanning: claustrophobic, evoke powerful emotions.
Iterated ulimatum game, making lots of money
Cooperating : pleasure, dopamine, feel good brain chemistry

Eng proverb: Equally to trust everyone as to trust no one
Neurochemistry of trust:
Oxytosin, the hormone bonding mother and infant, also found in any social relations
 
Trust is a predictor of national wealth
Trust is high in regions of high social safety-net and welfare
 
Why American are more religious than Europeans:
Conservative explanation:
* treat religion as corporations, religions develop mass marketing tools
* Mega-churchs offers everything, up to date with people's needs
* Europe: funded by govt, so no need to market
Liberal explanation:
* religion as a social structure offering help to needy people
* Europe with high social welfare, need less help, and thus of religion
* not as much welfare in America, and so more people flock to religion
Which of the conservative or liberal explanations is right remains unsettled.
 
Inject oxytosin, they become more trusting
Physical touch offers oxytosin, so the subjects get massage, and becomes more trusting

Game-exchanges,
develop trusts between strangers.
2% people don't get affected. These are “bastards”. Same percentage as sociopaths.
Maybe those keep us on moral toes.
Not just the part-time defectors, but the existence of these bastards are important for us to have the proper “regularized” strategy

Turning total strangers into trustworthy friends.
Enable positive social interactions.
Trade as one activity.
1800s: when goods do not cross boundaries, armies will.
conflict reduction: goods do cross frontiers,
trades don't prevent wars, but attenuates agression.

Missionary: provide goods such as tools to indigenous people
They are sophisticated traders
trades create poitcal alliances
food exchanges as social glue between villages
unattended consequence:
contact with neighbors create alliances
visiting and feasting create alliances,

New law: Starbucks cross frontier, armies do not.
open access of goods leads to trust, reduce political boundaries
google theory of peace. free trade of information, open access of national boundary

wikification of economy, google theory of peace, participate by billiions of people

Conclusion:
no dictoator will control web2.00”-fications,
because nothing will prevent products, information, ... to cross boundary
freedom will find a way

Q&A
how does democracy win over the people in power who prefers wars?
despite the weapon advances, we have fewer kills per capita

Free Market cant be totally free, but within a liberal society
require trust for banking, laws for contracts, ...
Liberal democracy is needed by capitalism.

Rarely does democracy fight each other.

Colin Camra at caltech
Expt on the Ultimatum game

Men vs Women:
Women are more generous, can use other cues to send trusts signal
Men needs more explicit cues to be trusting.

Conspiracy theories:
they don't work because large groups cannot deal with the competency and leakage problems.

Ultimatum: does time of response matter?

Games of time-discount:
will you take money now, or more later?
Money saving $100 vs $50 , people will walk 6 blocks.
But $2000 vs $1950. no one does.
 
Notion of reference point and anchoring. all relative with respect to framing.

Happiness: endless treadmill, we always want the next level to be happy

Coke vs Pepsi: 2-3X dopamine

Case of guy not cashing his lottery ticket because of tax
- punishing the gov't proposal of tax , though expensive

Invention of withholding tax
Milton prevented a tax revolution
Used the endowment effect:
not attached to things you never seen

Machiavalli:  govt making cold hearted decisions

What kind of investor are you?
Brokers do as well as dartboards.
The Warren Buffets exists. They must know inside info.

Talk show are conservatives

Evolution of emotions
how about emotion of grief. Not rational. Why? How does that translate to economics?

Debunking the steps of grief.

One theory: depression motivates you to change your environment.
But why being depress would motivate you to change?
Helen Fisher: why we love?
oxytosin, book on lust vs love
how long to be over a breakup? 18 months, for bonds to dissolve.

Negative emotions:
complex adaptive system at work, depriving
Howard Bloom (who sat next to me) answers:
group selection
Lucifer principle
Global Brain

Using Internet to experiment on trust.
e.g. Ebay ratings, signals of trust and distrust
Neuro-hormone -
social bonding aspect
bonding hormone: identified as the chemical set off in the gut when protein (meat) is digested,
The tribal shared feasts, fed lots of meat, feel "this is a good group of people."
 

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